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Higher returns make commercial properties attractive but they also need more money and risk-taking capacity.

Pic : Indranil Bhoumik/Mint

Real estate has always been an integral part of one’s investment portfolio, not only because of the potentially high returns but also the associated pride of ownership. But every investment in real estate does not fetch good returns. There are numerous instances where investments in real estate have turned sour for investors. But residential and commercial real estate respond differently to situations.“Residential is the preferred asset class, as demand is higher and less specific than in commercial real estate,” said Anuj Puri, chairman and country head, JLL India. Moreover, retail investors better understand residential properties than commercial properties. “Given the huge demand for homes in most cities, residential realty provides a reliable source of rental income if chosen well,” said Puri.But if the purpose is investment, then capital appreciation is important as well. “Residential realty market is going through a depression,” said Gulam Zia, executive director, Knight Frank India. In contrast, absorption of commercial space has improved; a trend that’s likely to continue. “Rental yield is higher” said Dhruv Agarwala, chief executive officer and co-founder, PropTiger.com.A commercial property could be a small shop in a neighbourhood, housing complex or a mall, a small office space, or even a joint investment in a bigger office space. Each of these should be looked at from different perspectives—investment amount, tenant profile, returns, exit options and associated risk.ShopsShops can be an entry point for a new investor. One can buy a shop in a neighbourhood market, a residential housing complex, high street area or a mall. “Returns can be 9-10% per annum, or even 12-13% if the shop is in a good location,” said Zia. Shops can be let out to be used as ATMs, retail outlets or to professionals such as chartered accountants and doctors.While investment amount will depend on size of the property, location matters. For example, a small shop in a high street area may cost more, and rental yield could be lower, but tenant profile will be higher, vacancy risk lower, and you can enter into long-term lease agreements.Smaller shops in malls are sold to individual investors, but can be difficult to manage and poor location may mean lesser footfalls. If you intend to buy such a space, ensure that the mall is managed by an established developer or a professional agency, even if this means capital values and maintenance costs being higher. But mall owners now prefer to lease out the space rather than selling it.OfficesMany companies are in an expansion mode and small enterprises are setting up offices in business hubs. According to a report by real estate consultancy CBRE, “Demand for corporate office space in India’s leading cities firmed up in the second quarter of 2015.... More than 8 million sq. ft. of commercial office space was taken up across seven leading cities, translating to a quarter-on-quarter (q-o-q) increase of around 70%.”While this may look attractive, you need deep pockets to be able to invest in good office space—2,000-20,000 sq. ft, or more. “One can expect 15-20% CAGR (compounded annual growth rate) from office space in the medium to long term,” said Anil Rego, chief executive officer and founder, Right Horizons, an investment advisory and wealth management firm. However, again, location plays a vital role. “Grade-A properties in corporate office segment offer stable investment yields,” said Anshuman Magazine, chairman and managing director, CBRE South Asia Pvt. Ltd. (Grade-A properties are those that are located in central business districts and are also well managed.)“For the conservative investor, ready commercial office properties may be suitable as it will give steady cash flow through an ongoing rental yield, as well as expectations of future appreciation,” said Magazine.Land parcels“Land can provide the highest capital appreciation as long as the investor has chosen the location and plot size well, has done thorough due diligence and can afford to wait for longer periods,” said Puri. Land parcels within city limits are limited and expensive, but one can also look at suburbs of metro cities. Typically, plots are not sold by established developers and you may have to approach development authorities or small plot developers. Going through real estate agents can be a risky approach. “Be careful about the titles since there are many fly by night operators in this segment,” said Rego.Private equity (PE) fundsPE funds buy stakes in residential or commercial projects, by tying up with developers, usually at the initial stage of a project. They exit once the project takes off and prices appreciate. “PE funds are more for high net worth individuals as one has to invest at least a couple of crores,” said Zia. HDFC Real Estate Fund, ICICI Venture, ASK Property Investment Advisors, Kotak Realty Fund, Piramal Fund Management, Motilal Oswal Real Estate, and IndiaReit Fund Advisors are some PE funds through which one can invest in domestic and foreign properties.Real estate investment trusts (REITs)REITs now have pass-through taxation—the investor pays the tax and not the fund. This has made them more attractive. REITs are similar to mutual funds—money is pooled in from investors and the corpus is invested, primarily in completed, income-yielding real estate assets. The revenue or income generated is then distributed among investors.“Retail investors with small amounts of money can look at REITs,” said Zia. “These may be available in India in a year and so. An investor may want to wait for these instruments to be launched as investing in real estate has to be done for the long term,” he added. The minimum amount that can be invested in REITs is expected to be as low as Rs.2 lakh.Things to rememberInvesting in commercial space can be complicated; good rentals depend on location, and subsequently the quality of the tenant. “One has to be careful about economic cycles, which can lead to volatility in absorption of new commercial developments. Lease rentals can fluctuate substantially based on economic cycles. Also, commercial buildings deteriorate over time and rental yields could fall,” said Agarwala.Liquidating is also tough. “Real estate is a very illiquid asset. So, it is not at all advisable to do any sort of investment with a short-term horizon,” said Rego.If you are the sole owner of the property, then ideally hold on to it for the long term. But keep doing the necessary maintenance so that the rentals and the value of the building appreciate or at least remain intact.Maintenance can also be an issue for properties that have multiple owners such as a shopping complex or an office building. “There could be operational risks involving building maintenance issues and regular upkeep of the facility that may have significant impact on the rental values of a commercial property,” said Magazine. So, before buying such a property, make sure that the property’s upkeep is taken care of either by the builder or an external agency. “The ideal investment horizon is 5-7 years,” said Puri. Issues of maintenance crop up after that time and in the absence of any consensus between co-owners, the building depreciates.For those keen to invest in real estate, commercial properties are a viable alternative to residential options. But do note that one needs financial abilities, sufficient market knowledge and longer holding power.- by Ashwini Kumar SharmaSource:- LiveMint

Modi used the opportunity to not just do an impromptu strap poll on his 16-month government's performance in India but also targeted his opponents in India

Prime Minister Narendra Modi arrives to address the Indian community at the SAP Centre in San Jose, California. Photo: PTI

Prime Minister Narendra Modi concluded his two-day visit to Silicon Valley with an hour-long address at a reception in San Jose. Addressing a crowd of over 18000 people largely comprising of the Indian community and many officials from the US government, Modi played to the gallery and enthralled the audience with witty one-liners and barbs at opponents like the Gandhi family back home.

Here are top 10 things Prime Minister Narendra Modi said in his one hour long speech at San Jose

1) I am coming to California after 25 years, seeing a lot of change. The people I have met here have the dream and determination to do something, to build something.

2) India has changed. The world is forced to change the way it looks at India… The change was brought about by fingers on keyboards, that created a new identity for India.

3) Why can’t the country run on mobile phones? Why can’t citizen rights be available on mobile phones? I am working on JAM. J - Jandhan Bank Account. A - Aadhar Card. M- Mobile governance.

4) I am often told to do something about brain-drain. The country is rich with smart gems, with new brains coming up every day. I think ‘brain drain’ can become ‘brain gain.’ I say it is not ‘brain drain’ but ‘brain deposit.’ The brains are looking for an opportunity to do something. It is now the time for people who are living outside India, to do something for the country.

5) Someone makes 50 crores, someone else has made 100 crores, someone’s son makes 250 crores, daughter makes 500 crores, son-in-law makes 1,000 crores, a cousin has got a contract, another cousin has got a flat. Is there any allegation against me?

6) 65% of the Indian population is below 35. There are 800 million young people in India today. The country will have to go forward. The ‘I’ in BRICs is becoming stronger every day.

7) The World Bank, IMF, Moodys. and credit rating agencies have been looking at India favorably over the last several months.

8) I keep hearing why a poor country like ours needs to think of space or invest in technology. What was the necessity of the Mars mission?… It is technology that will enable a fisherman to know via satellite when to go fishing, and which areas may have more concentration of fish.

9) E-governance is effective governance, e-governance is easy governance and e-governance is most economic governance.

10) There are roughly 170 departments within the government where it is using space technology. We are using biometric identification to issue a single identity, and number to everyone in the country.

Prime Minister Narendra Modi greets the audience as the organisers of reception clap at the SAP Center in San Jose, California. Photo: PTI

The first project that will be launched under the new brand is at Mumbai’s Altamount Road, one of the most expensive locations in the country.

Lodha Developers managing director Abhishek Lodha. Photo: Mint

Lodha Developers Pvt. Ltd, the country’s largest developer in terms of sales, is setting up a separate business vertical to develop super-luxury projects, starting with Mumbai and London.
Headquartered in London, The Luxury Collection will have a portfolio of residential projects. An added plus: the projects will be serviced by St Amand Hospitality, a company that Lodha has set up to offer personalized services to residents.
“Luxury is not just about location. It is a mix of product and service experience, spectacular locations with personal attention to detail. There aren’t any luxury projects in the true sense that are completed and delivered, and we want to lead the way,” said managing director Abhishek Lodha.
The first project that will be launched under the new brand is at Mumbai’s Altamount Road, one of the most expensive locations in the country. It’s a property called Washington House that Lodha bought three years ago from the US consulate for over Rs.350 crore.Next in line is a property at Grosvenor Square, in central London, that the developer bought from the Canadian government for over £300 million (around Rs.3,050 crore) in 2013.The Luxury Collection will also include the 75-storey Trump Tower and World Towers projects that Lodha is currently developing in central Mumbai.
Lodha said the company will do no more than one-two luxury developments a year.
Lodha has a large portfolio of mostly residential projects in Mumbai, across high-end and mid-segment price points, and clocked the highest residential sales in 2014-15 at Rs.7,800 crore.Its luxury plans may be seen as a bold move at a time when the real estate sector is battling a prolonged slowdown, forcing many realty firms to abandon plans to develop such projects and focus on what sells quickly—mid-market and affordable homes.
Luxury projects, which comprise only about 7% of projects in the top seven cities of the country, have seen an acute slowdown in sales in the last two years, with launches down to a trickle.
“The concept of luxury and branded residences, that typically cost upwards of Rs.10 crore, is still evolving in India and is not price-sensitive. The client mainly looks at exclusivity, the neighbourhood and if it makes a statement. Lodha is trying to position itself differently with this brand, targeting high net worth households and NRIs (non-resident Indians) that desire this kind of luxury,” said Ashwinder Raj Singh, chief executive officer (residential) at property advisory JLL India.The Altamount Road project will have one residence per floor. Besides three- and four-bedroom homes, there will be four five-bedroom pool villas and a triplex penthouse, that will be sold by invitation.
While Lodha did not close prices, those of homes on resale on Altamount Road and adjoining Carmichael Road are in the region of Rs.1.1-1.2 lakh per sq. ft, and according to estimates by property consultants, Lodha will sell at a premium, at about Rs.1.5 lakh per sq. ft.In fact, land-starved Mumbai, known for being the most expensive property market in the country, is seeing a handful of super-luxury projects coming up, whose prices are mostly dictated by location.
In the city’s Worli area, Oberoi Realty Ltd is building residences of 8,500-9,500 sq. ft that will cost upwards of Rs.35 crore, with a Ritz Carlton hotel in the complex. Omkar Realtors and Developers Pvt. Ltd’s Omkar 1973, in the same neighbourhood, has apartments that cost between Rs.15 crore and Rs.100 crore. An ongoing project on Carmichael Road is being sold at Rs.1.3 lakh per sq. ft.“Luxury is determined not just by the product, but also the way the apartments are sold, the services offered and the entire living experience. Lodha wants to create that experience for its customers in a bunch of marquee projects,” said Mudassir Zaidi, national director, residential, Knight Frank India, a property consultant.
-by Madhurima Nandy
Source:- LiveMint

Check ease of making an investment, costs involved and flexibility in investing and structuring returns

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Are your investments in tune with your needs? It is important that your money is invested in a way that is best suited to your circumstances. Also, other features of a product must also be in sync with your requirements for an investment to be truly suitable.Get goingHow easy is it to make the investment? Are there elaborate formalities specific for that product that need to be completed before you can invest? Or, can you invest with the standard requirements of know-your-customer (KYC), and permanent account number (PAN) formalities and make payments through your bank account? Some investments require a special account to be opened. For example, to invest in government securities, the investor has to open an account with a primary dealer to hold the securities in dematerialised (demat) form. The transactions can be done only through the primary dealer.Easy availability of application forms, multiple submission points and payment options make an investment easy to execute. Facility to transact online is an additional advantage.Costs, fees and taxesThe costs and taxes associated with an investment can eat into your investment returns, and must, therefore, be closely inspected before you make the investment decision. The costs may be at the time of making the investment in the form of commissions or brokerage, investment maintenance fee paid through the life of the investment, exit loads or other fees at the time of redemption or sale. These costs need to be considered even if you do not pay them directly. For example, the expenses charged to a mutual fund (MF) scheme go out of your returns, and are a cost even if you don’t pay these directly. Every year, the asset management company deducts a percentage from your corpus to meet its expenses, called total expense ratio.Taxation can also eat into your returns, said Kartik Jhaveri, founder and director, Transcend Consulting India, a wealth planning firm. “It is good to consider products that are tax-free or even those that provide indexation benefits,” he added. Some popular investments that can be used to claim tax deduction under section 80C of the Income-tax Act, 1961, are life insurance premiums, contribution to unit-linked insurance plan, Public Provident Fund (PPF), Employees’ Provident Fund, purchase of specified MFs (also called equity-linked savings scheme), term deposit for a period of not less than 5 years, and payment of loan taken for purchase or construction of residential house property.There are other products as well that give dual benefits.Managing investmentRemember the trouble of getting National Savings Certificate (NSC) shifted when you moved houses? Familiarise yourself with the process and formalities of managing the investment.Investments with clearly laid out and simple procedures for operations such as changes in name, address, status; making and changing nominations or even ease of transmission of investment to heirs in the event of death of investor, are preferred. Dematerialising or making the investments available in electronic form is something one should do. “Investments that can be held in your demat account with the rest of your investments can make it easy to manage,” said Jhaveri.Flexibility in investingThe suitability of an investment may depend upon the convenience it offers in terms of availability. For example, investment in securities offered through an initial public offering (IPO) are issued and available only during the specified dates. But bank deposits, investments in secondary markets, open-ended MF schemes and post office savings schemes are typically available for investment at all times.Some investments can be made only as a lump sum amount, such as a bank fixed deposit. Others can be made in smaller amounts over a fixed period, such as a recurring deposit or a systematic investment plan (SIP) in an MF scheme. Others, like the NSC, can be bought with small amounts whenever you have the funds without making any prior commitments.The minimum investment that has to be made can also be an important criteria for investors who may not have large regular savings to invest.Instruments that allow online investments are easier to start, track, manage and exit.Structured returnsYou can choose to receive the returns from your investment in a fixed deposit (FD) on maturity either as periodic interest payments or as a cumulative amount. Your PPF account or NSC, on the other hand, will not pay you any periodic interest. On maturity, the principal and interest is paid out to the investor in one go. MFs offer the choice of structuring the returns by offering growth or dividend options in their schemes.Lack of flexibility will limit the use to which an investment can be put. Flexibility allows you to align the nature of the return to the stage of your goals—appreciation if there are many years to the goal, or income if the goal has to be paid for now.Liquidity and its costHow easy is it to get your money out if needed? Is there a lock-in period, as is with equity-linked savings schemes (ELSS) and other tax saving investments? Is there a penalty or load that you have to pay for premature withdrawal, like a bank FD? If the investment value is likely to fluctuate, then withdrawing when you need to may mean that you lose value.“Liquidity of a product is one of the most important factors to consider. When choosing a product, you need to consider by when you need the money that you are investing,” said Arvind Rao, chief planner, Dreamz Infinite Financial Planner. For instance, MFs are much more liquid than, say, PPF or real estate, added Rao.So, if you are investing with a time horizon of a year, investing in products such as the PPF or a five- or three-year FD will not make much sense.The product provider may redeem or repay the investment or the investment may be traded on the stock exchange where you can sell the investment when you require the funds. Some investments, such as MF holdings, can be redeemed to the extent of your need for funds. Investments such as bank FDs or post office savings instruments may allow early withdrawals but for the whole amount and not partially, according to your requirements. For instance, upon premature withdrawal from bank FDs, one will be charged a penalty of up to 1%. In PPF, if you withdraw partially, you lose some of the long-term benefits of the product.The facility of taking loans against the investment also provides an option to generate liquidity without having to sell the investment.Are you being served?As an investor you have rights, and how easily and efficiently you can enforce these rights will give you the confidence to invest. You are entitled to information about your investment and its performance. The extent of information available and its frequency is important for you to be able to monitor performance. You should also consider the availability of unbiased information and expert analysis from other sources. Apart from this, the product manufacturer or provider should clearly define the services and rights of the investor.You should also know the remedies available, both through the investment provider and the regulator, in case you do not receive what you are entitled to. The ease with which you can register complaints and receive resolution is an important investment feature to consider.Not all features are equally important to all investors. If your income and savings are strong, then features like minimum investment level or availability of periodic investments may not matter much.“Many times people invest in a product by just looking at the returns and taxation aspects. They do not consider other things such as costs or flexibility. This leads to one holding products that are misfits in their financial portfolios,” said Rao.Make sure you go through all the features of an investment and understand what they mean before you commit to it. You will then be better able to align the investment to your needs.- by Tania Kishore JaleelSource :- LiveMint

Even as the real estate sector is facing a slowdown, Aditya Birla Group chairman Kumar Mangalam Birla is buying the iconic Jatia House bungalow in Malabar Hill here, for close to Rs 425 crore. This will be the second big transaction in the vicinity after the Godrejs took over Homi Bhabha's bungalow for Rs 372 crore last year.Built in the 1920s, Jatia House belongs to the Pudumjee group. The 2,900- sq-ft plot, with 25,000 sq ft of built-up area, was put on sale three months ago by its current owners.When contacted, a Birla spokesperson declined to comment but sources in the real estate sector said the deal has been finalised and lawyers are in the process of registering the property.The metropolis is witnessing some big-ticket investments in bungalows by the city's billionaires. After Reliance Industries chairman Mukesh Ambani constructed a $1-billion house on a Peddar Road plot, Raymonds chairman Gautam Singhania is constructing a similar multi-storey building in the vicinity.The Lodhas also bought Washington House - a US government property - on Altamount Road for Rs 375 crore in 2012. A year later, diamond merchant Dilipkumar Lakhi took over Cadbury House for Rs 350 crore. Ajay Piramal also bought a one-acre plot in Worli Seaface from Hindustan Unilever for Rs 453 crore for personal use. The bug to live in old bungalows also bit Indian cricket legend Sachin Tendulkar, who bought a house in Bandra for Rs 80 crore.This buying activity also comes at a time when Yashovardhan Birla, chairman of Yash Birla group, has applied to the state government to transfer the development rights of the iconic Birla House to developers.The demand for old bungalows in Mumbai comes in the backdrop of a steep fall in real estate prices. Mumbai developers say prices are down 15-20 per cent and are expected to fall further. A recent report by Ambit says real estate volumes have come down 10-15 per cent for three consecutive years and new launches have also drastically come down on a pan-India basis.Source:- Business Standard

Piramal Realty, an Ajay Piramal group company, is set to take over DB Realty’s Marine Drive project in Mumbai for close to Rs 1,000 crore, a company executive said on Monday.

Piramal Realty will construct a residential high-rise on the 2.2-acre plot. “It is more or less a done deal. We are working on permission from the government to construct the residential tower,” an executive said.DB Realty had planned a 5-star hotel on the plot that failed to go through because of legal issues involving the company’s promoters and a real estate slowdown. DB Realty shares closed flat at Rs 52.95 on Monday.The plot was behind heritage buildings on Marine Drive and would, therefore, not be subject to height restrictions, said the executive, who did not wish to be named. Piramal Realty's investment comes in the midst of a real estate slowdown. With investments of close to $3 billion, Piramal Realty has emerged as the second largest investor in the sector after HDFC. The company is constructing a residential project in Byculla, a commercial complex in Kurla, and residential projects in Thane and Mulund.Piramal Realty received equity funding of Rs 1,800 crore from Warburg Pincus and Rs 900 crore from Goldman Sachs in July. A large part of these funds will be used in the Marine Drive project. The investments by Warburg Pincus and Goldman Sachs were the biggest foreign direct investment in the Indian real estate sector in recent times, company executives said.“With the Indian economy growing at seven-eight per cent annually, demand for real estate will pick up as developers reduce prices,” said the executive. Property prices are already down and are expected to fall further.Rating firm Moody’s recently said property developers would face a challenging environment in the next 12 months. In Mumbai, unsold property stock worth Rs 1,00,000 crore is stuck with developers. The credit ratings of Piramal Realty’s rival, Lodha Developers, were downgraded by Moody’s and Fitch due to weak operating performance.

Most of us have not seen a completely smart home in our lives. One may wonder that if our parents did not need it then why should we? The reason is pretty simple. Times have changed and we do not have the same lifestyle which the previous generations did. We live in nuclear families and travel much more. Hence we need to automate some tasks and need to use technology for security and monitoring when no one is around.

Today, we are expected to travel for work and it has supposedly become easier to travel around the world as compared to few decades ago. This might be true physically but can be very stressful mentally especially if you are a parent. Male or female, all parents do worry about their kids and other family members while they are away. Busy schedules and time zone differences do not always let you connect with them via phone or even instant messaging. Luckily, a good home automation system can help you keep in touch and assure safety while you are away.Security cameras can be installed in your house, especially in your children’s bedroom and the video can be viewed through your mobile phone wherever you are. Whether your kids are sleeping, studying or playing, you can keep an eye on them through your mobile phone. When the kids know it, they also follow your instructions properly. A number of options are available for live streaming, saving videos at particular times and sending to your phone or laptop and watching highlights etc. This system detects motion in front of the camera and saves the video at that time. Hence, you can stay away from home and still not miss all the action.There is also an option to send regular alerts to your phone as and when certain event happen. For example your spouse reached home or left for work, kids came back from school or went out to play. You can also make sure that your domestic help actually came to clean the house as promised and send a message otherwise. You can also get alerts if any of the doors are left unlocked and lock them remotely. Similarly, you can take better care of the elderly and they do not have to walk around to check on the kids or the locks at night. They can check it all whether they are sitting the garden, balcony or their bedroom.

A home automation system can give you a better control over your home even while you are away. Most of the equipment today uses wireless technology and hence are hassle free. It is not just the western countries that are using home automation, India also has a huge demand for the same. If you hire a professional firm to automate your home, it will make your life easier as they will handle the installation and maintenance. You can get used to being assured of the security and whereabouts of your family members.
Source :- Fox Domotics Blog